The Claims Management Regulator at the Ministry of Justice (MoJ) has issued its annual report for 2016/17. In his introduction to the report, Head of Claims Management Regulation Kevin Roussell remarks that it is 10 years since the MoJ assumed responsibility for supervising claims management companies (CMcs), and that over this period, his organisation has adopted “an extended audit programme, [and] a more intensive range of investigations and formal sanctions drawn from our entire regulatory toolkit.”

Mr Rousell looks forward to the transfer of claims management regulation to the Financial Conduct Authority (FCA), which will deliver a stricter regulatory environment for CMCs. The legislative process for transferring claims regulation to the FCA has already commenced, but Mr Rousell promised that the MoJ “will continue to deliver the best service we can under the current legislative framework, while working closely with the Financial Conduct Authority and others to prepare for and deliver a successful transition.”

In the 12-month period covered by the report, the MoJ cancelled the licences of 69 CMCs who breached applicable rules and legislation. A further 196 companies were warned by the regulator about their business practices, and a total of £1.1 million in fines was levied on errant CMCs.

Later in the report, the MoJ reveals that three companies had their licences cancelled for issues related to nuisance calls and texts. Five large fines and 40 warnings were also levied against companies who failed to follow the law regarding marketing communications.

Three further CMCs lost their authorisation for failing to follow applicable rules, legislation and guidance regarding financial claims, such as those involving payment protection insurance (PPI) and packaged bank accounts. In this sector, the MoJ also fined two companies, imposed conditions on two more and issued 27 warnings. The MoJ says its key areas of focus regarding financial CMCs include marketing practices, pressuring clients into signing contracts and charging upfront fees.

The report remarks that:

“Taking fees at the outset of a claim is not currently prohibited but this particular model has been favoured by CMCs that use high pressure sales tactics, mislead clients, occasionally taking payment without the client’s authority and then making it difficult for the client to cancel the agreement, get a refund or make a complaint. We have investigated several of these CMCs again this year, and also a number of CMCs that accept cases generated by an introducer that takes an upfront fee. Following these investigations, CMCs have had their authorisation cancelled, varied and have been issued with financial penalties.”

50 warnings were issued to CMCs conducting personal injury claims activity.

The report also highlights that 2016/17 saw the MoJ conduct more investigations than in any previous year, and that no CMC was successful at Tribunal stage when appealing against an MoJ enforcement action.

The report acknowledges the recent rise in holiday sickness claims, and comments that this “will be a key priority area for us in 2017/18.”

According to the report, other compliance priorities for the next 12 months include:

• Ensuring CMCs conduct sufficient due diligence to satisfy themselves that personal data they receive has been obtained legally and compliantly
• Ensuring customers of personal injury CMCs are not pressurised into making a claim, or to exaggerate their injuries
• Ensuring financial CMCs gather sufficient information to present a specific and non-generic complaint to the relevant financial firm

The information shown in this article was correct at the time of publication. Articles are not routinely reviewed and as such are not updated. Please be aware the facts, circumstances or legal position may change after publication of the article.